created by Glenn Tamashiro

Hello and welcome. This site was developed to keep you informed about the various lessons and activities that are held in our Government/Economics and Honors Government/AP Macroeconomics classes.

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Econ: IES Summit Loan

Learning Target: You will utilize basic concepts in economic development that include borrowing from the summit bank and learn about the impact of debt on a country.


bank-loan
During the trade session, you and your team will be able to take out a loan from the Summit Bank. Loans can only be secured with your country’s export coupons as collateral. Each coupon will serve as collateral for 5 WELCOs. You must hold the loan for a minimum of 15 minutes. The fee for taking out a Summit Loan is a flat rate of 5 WELCOs.

Ten points are awarded to each team that successfully takes out and the repays the Summit Loan. You must complete the transaction during the Trade Session. A 10 point deduction will be taken from each team that defaults on a Summit Loan.

Time is the scarcest resource at the Summit. Careful planning is critical for your team’s success. It’s a good idea to select one advisor on your team to complete the loan process while the rest of the team is completing trades.

 


Players Guide Summit Tip No.2 page 30

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HGov: Circular Flow


Circular Flow Earnig a Living
The market economy has two groups of decision makers: households and businesses. It also has two broad markets: the factor market and the product market.

The upper half of the diagram represents the factor market. The factor market is the place where resources or the services of resource suppliers are bought and sold. In the factor market, households sell resources and businesses buy them. Households own all economic resources either directly as workers or indirectly through their ownership of business corporations. They sell their resources to businesses, which buy them because they are necessary for producing goods and services. The funds that businesses pay for resources are costs to businesses, but are flows of wage, rent, and interest income to the households. Resources therefore flow from households to businesses, and money flows from businesses to households.

The lower part of the diagram represents the product market. The product market is the place where goods and services produced by businesses are bought and sold. In the product market, businesses combine the resources they have obtained to produce and sell goods and services. Households use the income they have received from the sale of resources to buy goods and services. The monetary flow of consumer spending on goods and services yields profit revenue for businesses.

The circular flow model suggests a complex inter-related web of decision making and economic activity involving businesses and households. Businesses and households are both buyers and sellers. Businesses buys resources and sell products. Households buy products and sell resources. As shown in the diagram, there is a counterclockwise real flow of economic resources and finished goods and services, and a clockwise money flow of income and consumption expenditures. These flows are simultaneous and repetitive.

Circular Flow income and expenditures

The U.S. economy is divided into a private sector, which includes households and businesses and a public sector or government. Households play a dual role in the economy. They supply the economy with resources and they purchase the greatest share of the goods and services produced by the economy. They obtain personal incomes in exchange for the resources they furnish the economy and from transfer payments they receive from government. Businesses make up the second major part of the private sector. Most businesses in the U.S. are characterized by the differences among firms in size and legal form, as well as in the products they produce. The economic activities of the public sector are extensive. Government performs five economic functions in the economy. These functions are: providing the legal structure, maintaining competition, redistributing income, reallocating resources, and stabilizing the economy.

Econ: IES Foreign Aid

Learning Target: You will learn about the opportunities available to people in countries around the globe and the impact that governance has on these opportunities.


foreign aid
Foreign aid in the context of the Summit, is a transfer of cash from a Division 1 Country to a Division 3 Country. Division 1 Countries have the obligation to provide foreign aid cash for the development of the less fortunate countries of the world. Hey, they can afford it. They’ve got the highest living standards in the world, and Division 3 Countries need a helping hand. Each Division 1 Country is given extra cash to provide foreign aid to the Division 3 Countries. Each Division 3 Country has foreign aid vouchers as evidence of their need for aid. The exchange takes place between a Division 1 Country with foreign aid cash and a Division 3 Country with a foreign aid voucher.

Division 1 Countries
The exchange rate between foreign aid cash and foreign aid vouchers is 5 WELCOs = 1 foreign aid voucher. For example, both Australia and Canada are Division 1 Countries. Australia has 10 WELCOs in foreign aid cash and Canada has 30 WELCOs in foreign aid cash. Based on the exchange rate above, Australia must use its 10 WELCOs to buy 2 foreign aid vouchers and Canada must buy 6 foreign aid vouchers with its 30 WELCOs. So, how do we know if both of these Division 1 Countries actually gave away the cash? At the end of the trading session, Australia must be able to show 2 foreign aid vouchers and Canada must be able to show 6 foreign aid vouchers from Division 3 Countries as proof that they met their foreign aid obligation. Without the foreign aid vouchers as proof, Australia and Canada would not have met their foreign aid obligations and will have 15 points deducted from their overall score.

Division 3 Countries
Now let’s look at two Division 3 Countries, Angola and Bangladesh. Angola has 3 foreign aid vouchers and Bangladesh has 4 foreign aid vouchers. Both Angola and Bangladesh will exchange each foreign aid voucher for 5 WELCOs with a Division 1 Country. Angola will receive a total  of 15 WELCOs and Bangladesh will receive 20 WELCOs. So, what would you do with the cash? Your goal as Economic Advisor is to improve living standards and the cash will help you gain your imports or buy Long Term Development Projects. Be sure to include the foreign aid cash in your strategic plan, outlining how the cash would be used to improve living standards.

Division 2 Countries
Typically, Division 2 Countries are not wealthy enough to give aid and not poor enough to receive aid. Some exceptions exist, so check your exports and cash endowments to determine whether your country will be involved in a foreign aid transfer.

 


Players Guide Foreign Aid Memo page 29

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HGov: Andersonville Economy What Really Happened



We read “Andersonville, What Really Happened.”  We read it, underlining those aspects of the Andersonville economy that reflect a command approach and circling those aspects that reflect a market approach. Finally we shared our ideas on the question: “Is it appropriate to label the Andersonville system as a market economy?” We learned that this economic system, like many economic systems, was a mixture of market and command economic systems.

Econ: IES Classification

Learning Target: You will learn how countries around the globe work and live.


Material-World-Peter Menzel
Each country at the Summit is classified into one of three categories: Division 1, Division 2, or Division 3 countries. The basis for this classification system is gross domestic product (GDP) per capita. Each category has its own set of characteristics in the areas of currency, export total, cash endowment, and foreign aid.

Division 1 Country
The Division 1 Countries category represents those countries that have the highest standards of living. In your research, you may have come across different names for this group of countries, such as industrialized or developed countries. The Division 1 Countries currency is called the WELCO. The WELCO is the basic unit of value and is the most valuable currency at the Summit. Division 1 Countries have the largest number of exports, cash endowments, and give foreign aid cash to Division 3 Countries.

Division 2 Country
The Division 2 Countries category contains those countries that have fairly decent living standards, but clearly are not as advanced as the Division 1 Countries. In your research, you may come across names such as developing or emerging market economies that describe this category. Division 2 Countries use a currency called the DEVCO. The DEVCO is worth half as much as the WELCO. Division 2 Countries have fewer exports and less cash than Division 1 Countries.

Division 3 Country
The Division 3 Countries category contains those countries that are very poor and have the lowest standard of living on the planet. In your research, you may have come across names such as less developed or underdeveloped to describe this category of countries. Division 3 Countries use a currency called the LESCO. The LESCO is worth half as much as the DEVCO. Division 2 Countries have the fewest exports and the least amount of cash of any of the three categories. Division 3 Countries have foreign aid vouchers that can be exchanged for cash.

 


Players Guide Classification Memo page 24

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HGov: Andersonville Economy


Andersonville
All society must develop an economic system to answer the basic economic questions. While we usually identify economic systems with a country (the United States has a market oriented system; the former Soviet Union had a command system), it is also possible to identify an economic system at a micro level. Students will examine how a group of civil war prisoners developed an economic system within their camp, a system designed to allocate scarce resources.

Econ: IES World Governance Indicators

Learning Target: You will learn about the important connections between living standards, investments, and governance.


ies-governance-indicators
Teams will compare the World Governance Indicators score between their country and the United States. The Worldwide Governance Indicators (WGI) capture six key dimensions of governance Voice & Accountability, Political Stability and Lack of Violence, Government Effectiveness, Regulatory Quality, Rule of Law, and Control of Corruption. The Worldwide Governance Indicators offer a useful snapshot a country’s quality of governance. These indicators have been used by foreign aid donors such as the United States, who use the indicators to allocate aid packages of hundreds of millions of dollars.  They will also explore the relationship between investment rates and corruption. Is there a connection?

 


Homework:
Players Guide World Governance Indicators p.26 #1-2
Players Guide Investment Rates and Corruption p.28 #1-5

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